Interview with Perry Solomon, Executive of PepperCoin

We are a payments technology company. While we build technology, we focus on enabling profitable new business models for companies that are looking to sell low priced items. These items include physical products as well as digital goods and services. As a payments company we are focused on emerging opportunities that we define as micro payments under $5.00 and small payments under $20.00.

Our services enable profitability for companies that are looking to sell at these lower price points. We do it in a way that allows for our customers to offer services to their end users that is very comfortable for each group.

We are focused on working with digital media companies. There are a number of industry verticals where there has been a tremendous growth in demand for these kinds of payment services. Areas of focus include music, games, publishing, video, etc. These areas are key services that are being offered to consumers on a pay-per-use basis.

We have seen the emergence of a much more open marketplace with the adoption of pay-as-you-go applications. We are pleased to be working with companies in these vertical markets to help them provide more flexibility to their consumers.

We view it as being the third leg of the stool. When you think about companies that are in the business of creating content for their consumers there are legitimate business models in the physical world. These companies generate revenue through advertising, through subscriptions, and through pay-per-use.

Advertising was dominant though 2001 and there wasn’t an efficient way for the content producer to make their content available on a pay-as-you-go basis. We enable a way for content companies to be able to build profitable businesses through pay-per-use and subscriptions. We see our service as rounding out the business model of online content producers.

While the consumer likes a pay-per-use model, this process has to be very similar to a traditional ecommerce transaction. We believe that consumers have preferred payment methods; credit cards, debit, etc. PepperCoin will be enabling those types of payment methods, but doing it in a way that is more profitable for the seller.

Going forward, where it is less of a closed network and alternative payment system. We will be more of an enabler of traditional payment methods. Merchants want to make it very easy for consumers to buy and go on their way. Rather than creating a stored value account or alternative payment method that takes the consumer away from the purchase process we will provide a much more traditional ecommerce experience.

Yes. We believe that the consumer is really at the stage where they are experimenting and adopting pay-as-you-go opportunities. They like the flexibility and choice of this type of system. Merchants want to serve the customer but do it in a way that doesn’t require a separate account, etc.

We differentiate ourselves by our universal aggregation approach. This allows consumers to work with multiple merchants using their existing payment methods without working with a third party.

We see this as a multi-billion dollar business. This marketing opportunity is evolving in stages. That marketplace is currently focused around digital content and services. Music downloads are seen as being a $3 billion business by 2007. In context of the music industry, which is a $30 billion business we are only at the beginning. Each of the verticals I mentioned earlier are multi-billion dollar businesses, and we see ourselves as capturing a portion of that market.

That is a major barrier to the growth of these market opportunities. These costs are broken down into fixed fees as well as variable components. At low price points a fixed fee can really eat up the profitability of that transaction for the merchant. The general approach is to aggregate a lot of small payments and process those as larger payments.

Third parties have also created stored value or prepayments as a way to get customers to pay up front and then slowly utilize their account. That has proven to be very challenging as well because consumers don’t want to prepay. Also, the transaction fee is not the consumer’s problem it is the merchant’s.

Our patent pending universal aggregation allows us to aggregate a stream of payments from many different consumers to many different merchants into larger overall payments. We then process these universal payments through the payment network. This ensures the integrity of the system as a whole.

We are providing a means for existing payment methods to be used by customers on our merchant’s sites. It doesn’t require the consumer to pre fund an account or for PepperCoin to be holding the customer’s money.

PepperCoin version 1.0, which is the current service offering we do have a download. Once the merchant sets up an account, it is a one-step process. We created the customer download to enable the merchant to get set up much more quickly. We are moving away from the client download.

We entered into the business in 2002 and have really seen the market take off. When we first launched there was a lot of skepticism about whether or not consumers wanted to use this type of service. As larger digital merchants have embraced pay-per-use they want to create a seamless experience for their customers. They want to be able to support existing payment methods and processes.

That is certainly what everyone focuses on in the ecommerce world. You still see a lot about shopping cart abandonment and conversions. We are focused on working with our partners to create a seamless experience that will increase the conversions that we see.

The challenge is finding the business leaders that understand the opportunity. We focused on media companies and digital merchants that want to grow their top line. We are seeing a lot of interest in our services by companies that are looking for additional or incremental revenue.

We have grown at a time when the technology business has gone through some really tough times. We look for bringing in the best possible people in technology, sales, and marketing. We are selling a vision of the future around small and micro payments and look for people that share our enthusiasm.

When we first began looking at the opportunity in 2001 we focused on a plan that would enable us to be flexible and control our costs. We have seen that the market has really accelerated over the past 18 months. The lesson as an entrepreneur is to believe in the opportunity and to be able to scale the business when the opportunity hits.